Means Test Question

[DivorceRuinedMe]

I am utterly and thoroughly confused about Chapter 7. Can someone explain to me the qualifications for one to file?

The way I think it is is that if you are under the median income for your state (for your family size), then you qualify to file for Chapter 7. Am I correct or is there some other "test" that I have to pass in order to file for Chap 7?

[juststupid]

From what I know thats how it works.

[jal1129]

The reason people look at 13 instead of 7 is either thier income is too high (over the median for thier state and family size) and/or they have assets they want to protect that they are not able to exempt. Each state has its own list of exemptions with some being more liberal than others.

[keepmine]

Am I correct or is there some other "test" that I have to pass in order to file for Chap 7?

Once you pass the means test, you look at your expense and income schedules. If you have as little as $166/month disposable income, that can be used to fund a Chapter 13.

[BKTango]

Keep in mind if you own any assets you need to protect, or are behind on car payments or mortgage payments then a ch7 may not be the right choice for you, unless you want to surrender those assets. Other than that if you are below your states median income there is no presumption of abuse and you qualify for ch7 that's it end of means test....but your income and expense schedules are looked at and if you show significant disposable income it is possible they will look at that as being able to fund a 3 year ch13 plan.

[DivorceRuinedMe]

Can someone link me to the expense and income schedules please?

Are they hard to complete? I do have an atty that I plan to hire once I file (I have to wait 5 more months due to skewed income in March) so I haven't officially hired him yet. I like to do as much research on my own before I call him again with more questions.

Thank you to everyone that has responded. I'm truly greatful. This is so scary!

[SinkingFast]

You can get info on BK here:

http://www.usdoj.gov/ust/

In the BK Reform box, upper right, there's a link to Means Testing Info. Also to Credit Counseling and Debtor Education. You have to use a DOJ approved agency to get your Certs.

Lower down on the page, under "What's New", there's a link to the new Forms.

And if you really wanna learn, get the Nolo book.

[DivorceRuinedMe]

My situation is so messed up. I don't even know where to begin b/c I can't even fill out the means test forms correctly YET.

I just bought a house with my fiance before my credit got ruined. We haven't even had to pay a mortgage payment yet and no utilities yet either. Once I get those things, then I take an average for those and complete the forms, correct? Food and such is going to be skewed as well b/c I'm not actually LIVING in the house with my fiance and his two kids yet. Me and my two kids are stuck at my parent's house b/c I'm waiting on a transfer for my job to go through otherwise I'd be communting an hour and a half ONE WAY! . I go to our house on the weekends. (We are getting married next month). Maybe I should commute though b/c then it would lower my disposable income b/c of all the GAS costs!

Does the trustee look at your bank statements and see what you've spent and where during the 6 months prior to filing? We will be a family of 6 and we just pass the median income test. Now I'm sweating out the whole disposable income thing. We would like to live very modestly so that we can eventually start over but this may make our income look like it's huge when it's really not. Do you all think it's better to go out and buy stuff you need at like Walmart (even though you don't really NEED it immediately) so it looks as if you have less disposable income. What I mean is like on baby diapers and formula, clothes and shoes for the kids to stock up on or is this not advised? In reality, some months we will need a lot of stuff if a child goes through a growth spurt and others we may need nothing so some months will look like we have tons of extra money when we really don't. I just want to do the right thing and plan in the next 5 months the best I can before we file.

[sofarindebt]

I don't think you will have a problem

passing the means test or expenses. We are a family of 5 and spend $600 on groceries/month, plus another $2-$300 on diapers and target stuff.

Not sure how they would look at that you JUST purchased a home. Is there any way you can wait, have you stopped paying your credit cards yet?

[DivorceRuinedMe]

Next question: Do they use the IRS standards or what you actually spend (so long as it's not exorbitant)?

[DivorceRuinedMe]

passing the means test or expenses. We are a family of 5 and spend $600 on groceries/month, plus another $2-$300 on diapers and target stuff.

Not sure how they would look at that you JUST purchased a home. Is there any way you can wait, have you stopped paying your credit cards yet?

I am waiting for appx 5.5 more months to file due to skewed income in the month of March (cash out of 401K for down payment on house). We just closed on our house on the 6th of April (before the perfect credit went down the toilet). This is the first month that I will not be paying my creditors in my lifetime. Needless to say, I'm scared about that (and feeling guilty about it too).

[jal1129]

As for the question of if they use IRS standards or actual costs that can vary from district to district. Ours was somewhere inbetween. The attorney filled out the forms with numbers the trustee was used to seeing, and did'nt use our actual numbers or the IRS numbers. I think I posted in another thread today that she put in $50/month for food for a family of 4 (including teenage boys)!

You say you cashed out your 401k for a downpayment on your house. How much was the downpayment? That could effect a chapter 7 filing. Some states allow for quite a bit of equity, but for example in my state its only $2500 in equity for a house.

[SinkingFast]

On Schedule J,.......... What your attny enters will be a mix of real life (mortgage/rent, insurance, utilities, and such) expenses, and what the Court is used to seeing (food, clothes, school lunches, etc).

Here's a quick and dirty Means Test calculator for you:

http://www.legalconsumer.com/means-t...ator/index.php

Just enter your Zip Code, plug in a few numbers, and it will spit out a result. It won't show what to enter where, but at least you'll get an idea of where you stand.

[lrprn]

Next question: Do they use the IRS standards or what you actually spend (so long as it's not exorbitant)?

It's a combination of the IRS standards based on your family size and location and your personal and other family living expenses.

If you've been scrimping by spending much less than you should on health care, clothing, etc., remember that you should use living expense figures that reflect the average in your neighborhood and that are acceptable to the court. Unfortunately these amounts can vary widely between trustees and in different areas of the country - that's why it's so valuable to work with an attorney who knows what will fly and what won't in your bk district.

[ilovemycaitybug]

As far as I know that is how it works... I haven't been to my 341 meeting yet but my attorney has it listed as a no-asset chapter 7 case. I think if you go OVER the median for the size of your family, you can still pass the means test by answering other questions.